Crunch the numbers

Wednesday

Jan 28, 2009 at 12:01 AMJan 28, 2009 at 6:47 PM

Follow these tips to start off the year with responsible spending habits

Follow these tips to start off the year with responsible spending habits

With the economic crisis affecting families across the nation, not even the Jones can keep up with the Joneses. Luckily, it’s now trendier to save than to splurge. Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling, shares some budgeting tips you can stick to throughout the year.

Take stock

It’s impossible to know where you’re going until you know where you are, Cunningham says. The first order of business in creating and implementing a budget is tracking your expenses, down to the last dollar. This requires you go beyond tracking last month’s utility bills and track your daily needs and wants.

If you know holding onto every receipt won’t happen, carry a small pad and pen at all times and mark down purchases. This will give you an accurate sense of where all the money goes and might even deter you from impulse buys in the future. Cunningham suggests tracking spending habits for 30 days and involving the entire family.

Cut bad habits

Whether it’s a pack a day or a six pack a day, nixing unhealthy habits can be better for your health and your pocketbook.

Brown bagging it for lunch instead of buying high-calorie fare from a drive-thru will beef up your savings account, not your waistline. Giving up these habits will not only add to the quality of your life, but will likely keep you from handing all your hard-earned money to your HMO.

Even if it’s buying one latte instead of three, making healthier choices will add to your income and keep your budget on point.

Pay down debt

The average American is about $9,000 in credit card debt, says Cunningham, who has three recommendations for digging out of the red:

1. Make it a priority to tackle the debt that is doing the most damage. Pay down the credit card with the largest balance and the highest interest.

2. If the biggest bill is too daunting, power-pay your old debt. Cunningham says that when you pay older, smaller bills — like an old medical bill – you can then use that feeling of accomplishment to get motivated to tackle bigger balances.

3. Never use more than 30 percent of your credit card’s limit. You’ll avoid fees and prevent spending money you don’t have.

Slash the incidentals

Start to look for hidden money in your budget by either trimming or packaging extraneous costs, which means taking a realistic look at your daily habits.
Ordering pizza two nights a week instead of three can reap some real financial results, Cunningham says.

If you only watch a fraction of the channels in your cable plan, consider downgrading your package. Another option: Bundle your cable with your cell phone, landline and Internet. The company will likely cut you a deal.

Examine payments you put on automatic pilot, like Netflix or a gym membership. Within those services, make sure you’re not paying for all the bells and whistles. For example, don’t pay for the texting option on your cell phone plan when you don’t know how to text.

Get rainy-day ready

Millions of Americans have no savings and are flying without a financial net. Start putting money away for emergencies and the future.

Cunningham suggests saving at least one month’s salary for an emergency, such as for a flat tire — not a shoe sale. In addition, aim toward putting three to six months of your monthly income in a separate savings account.

Wondering where you’re going to find all this extra income? When you’re putting together your monthly budget, divide it into categories. If you have 15 spending categories, cutting $10 from each will save you $150 a month.

Cunningham suggests lowering your utility bills by using less water or putting on a sweater instead of cranking the heat.

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